Worked example
Example with the default numbers — change them above.
Starting amount: ₹1,00,000 · Interest rate (a year): 8% · Time: 10 yrs · Interest is added: Yearly
₹1 L at 8% a year, added yearly, grows to ₹2.16 L in 10 years, of which ₹1.16 L is interest.
| Final amount | ₹2.16 L · 2.16× your starting amount |
|---|---|
| Interest earned | ₹1.16 L · ₹35,892 more than simple interest |
| Effective yearly return | 8% · 8% quoted, added yearly |
| Time to double | 9 years · at this effective return |
| Worth in today's money | ₹1.21 L · after 6% yearly inflation |
How the Compound Interest Calculator works
- Enter your starting amount, the yearly interest rate and the number of years.
- Choose how often interest is added: yearly, half-yearly, quarterly or monthly. The yearly rate is split evenly across those periods.
- Each period the balance is multiplied by one plus the rate for that period, and this repeats for every period in the term.
- The calculator subtracts your starting amount to get the interest earned, and compares it with simple interest on the same amount.
- It also shows the effective yearly return, how long the money takes to double and what the final amount is worth after inflation.
Compound interest
A = P × (1 + r / n) ^ (n × t)
A = final amount
P = starting amount
r = yearly interest rate as a decimal (8% is 0.08)
n = times interest is added in a year (monthly is 12)
t = time in yearsAssumptions and limits
- The rate stays the same for the whole term and no money is added or taken out after the start.
- The yearly rate is divided evenly by the number of periods (nominal rate). Some products quote the effective rate instead.
- Tax, fees and charges are not deducted. Interest from bank deposits is taxable, which lowers what you keep.
- Inflation is a steady figure you choose; the today's-money value divides the final amount by (1 + inflation) for each year.
Frequently asked questions
How do I calculate compound interest?
Use A = P × (1 + r/n)^(n×t), where P is the starting amount, r the yearly rate, n the number of times interest is added in a year and t the years. For ₹1,00,000 at 8% added yearly for 10 years, A is about ₹2.16 lakh, so the compound interest is about ₹1.16 lakh. Enter your own numbers above.
How does compounding frequency change the result?
The more often interest is added, the more it earns on itself, so the result rises a little. ₹1,00,000 at 8% for 10 years grows to about ₹2.16 lakh with yearly compounding and about ₹2.22 lakh with monthly compounding. The difference is real but small next to the effect of a longer time or a higher rate.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate doubling time: divide 72 by the yearly rate. At 8%, money doubles in about 72 ÷ 8 = 9 years. It is an approximation that works best for rates between about 6% and 10%. This calculator works out the exact doubling time from your effective return.
Do banks use compound interest?
Yes for deposits: Indian banks usually add fixed and recurring deposit interest every quarter. Loan interest is usually charged each month on the outstanding balance (the reducing-balance method), which is not compounding unless unpaid interest is added to the loan. Savings accounts pay interest on daily balances. The exact method differs by product, so check your bank's terms.
Why does time matter more than the rate in compounding?
Because growth builds on itself, extra years add the largest gains at the end. ₹1,00,000 at 8% grows to about ₹2.16 lakh in 10 years but about ₹4.66 lakh in 20 years, more than double for double the time. Starting early gives each rupee longer to compound, even with a modest rate.
Does inflation reduce compound interest returns?
Yes. Inflation lowers what the final amount can buy. At 6% inflation, ₹2.16 lakh received after 10 years is worth only about ₹1.21 lakh in today's money. Use the inflation option under advanced settings to see the today's-money value for your own numbers; if it is below your starting amount, your buying power fell.
Sources
Logic and rates last verified on .
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